BMO Economics Predicts North American Auto Industry to Finish Strong by End of 2013

BMO Economics Predicts North American Auto Industry to Finish Strong by End of
2013
- Canada and U.S. auto industry on track for solid growth
- Manufacturer innovation fueling consumer demand
- Market conditions, industry investment and affordability to drive
performance in 2013
TORONTO, ONTARIO -- (Marketwire) -- 02/05/13 -- The Canadian and U.S.
auto industries are poised for solid growth this year - finishing
strong with a predicted increase of 7 per cent to 17.5 million units
sold - according to a new report by BMO Economics. With a notable
pick-up in consumer spending, manufacturing sales are expected to
accelerate.
The industry is coming off some momentum that was building last year.
Canadian auto sales saw an increase of 5.5 per cent in 2012 compared
to 2011. November sales were up 6.5 per cent in dollar terms over
2011, at a total of C$98.6 billion compared to C$92.6 billion the
year prior.
In the U.S., auto sales experienced an increase of 15 per cent from
2011. Year-end sales at U.S. dealerships and auto part stores reached
US$891 billion in 2012 - an increase of 7.7 per cent.
"The solid domestic market positions North America as an attractive
location for auto manufacturers to invest in for 2013," said Alex
Koustas, Economist, BMO Capita
l Markets. "The recent growth suggests
automakers will continue to expand capacity and increased
technological developments in North America - a trend we expect to
continue in the coming years."
Investment Fuelling Innovation and Demand
Continued investments in the auto industry - both north and south of
the border - are fueling manufacturing innovation and consumer
demand. Notable announcements from government and manufacturers
include a C$250 million commitment from Prime Minister Stephen Harper
and a US$600 million investment in a General Motors plant located in
Kansas City, Kansas.
Mr. Koustas noted that numerous technological innovations have been
made over the past four years, most notably related to fuel economy.
Thirty-seven per cent of vehicles achieved a fuel efficiency rating
of 25 miles per gallon, more than doubling since 2008.
"Every segment, from compact to full-sized pickups, has seen improved
fuel economy as manufacturers vie to meet new U.S. efficiency
standards scheduled for 2016," noted Mr. Koustas.
Compact and midsize vehicles are now adopting amenities which in the
past were reserved for their upper-market counterparts. This luxury
segment, however, has been the fastest-growing and most profitable
area for manufacturers over the past four years.
Affordability in the New Vehicle Sector
The National Automobile Dealerships Vehicle reports vehicle prices
rose modestly in 2012, while new vehicle affordability is enjoying
its best stretch in years.
According to BMO Economics:
-- Used car prices rose 12 per cent between 2008 and 2011, compared to 5.7
per cent over the same span for new cars
-- Consumers are purchasing new vehicles due to improved car quality; used
cars are maintaining their value for longer
The Big Three automakers (Ford, General Motors and Chrysler) have
caused a stir with new supercar designs, but big changes in their
core lineups will drive sales this year. Revamped pickup truck
lineups will be a big boost for the profile of these automakers as
the housing market heats up. Meantime, Toyota and Honda have
redesigned some of their best-selling models to bolster their
position in the mid-sized segment against hard charging competition
from both Kia and Hyundai.
Robert Sadokierski, Head of Dealership Financing for BMO, expects
auto manufacturers will continue to offer more incentives for
consumers. "There is good news for prospective buyers as companies
roll out redesigned models in the compact, mid-sized and luxury
segments. In addition, the loonie's strength should support sales and
benefit both dealers and consumers by lowering the costs of vehicles
and enhancing purchasing power."
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a
highly diversified North American financial services organization.
With total assets of $525 billion as at October 31, 2012, and more
than 46,000 employees, BMO Financial Group provides a broad range of
retail banking, wealth management and investment banking products and
solutions.
Contacts:
Media Contacts:
Russell Baker, Toronto
(416) 867-3996
russell.baker@bmo.com
Peter Scott, Toronto
(416) 867-3996
PeterE.Scott@bmo.com
Ron Monet, Montreal
(514) 877-1873
ronald.monet@bmo.com
Laurie Grant, Vancouver
(604) 665-7596
laurie.grant@bmo.com
Internet: www.bmo.com
Twitter: @BMOmedia